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Pros & Cons of Mult-family vs Single-family Real Estate

I’m a big fan of multi-family real estate investing, but I understand the benefits of single-family at the same time. Investors have their own preferences for good reasons. Hopefully, this helps you find something that works for you.

Multi-family Real Estate

PROS

Property management is so much easier and more efficient with multi-family investing, for numerous reasons. When you need to collect rent, you have multiple tenants in a single location as opposed to driving to multiple places. Additionally, when dealing with neighbors, the neighbors are tenants too and much easier to manage

Acquisition cost per unit is usually lower with multi-family; one roof over multiple units with shared systems results in lower costs per door. The ratio of rent collected to acquisition cost per door is higher with multi-family than single-family.

Lower maintenance costs are realized from shared systems. A single heating source for a whole building, fewer water lines from the city, and material that can be used in multiple units but stored in a single location will all make a maintenance technicians day more efficient, saving you money

If one tenant doesn’t pay, there are more to cover your expenses

CONS

If it’s flipping you’re after, there’s money to be made in multi-family. However, that profit will be much slower to realize than with single-family. To flip a multi-family property, there are more units to renovate which takes more time, and you’re holding onto the property longer with higher holding costs

Selling a multi-family property takes longer due to a smaller pool of buyers. You may also have to do some owner financing to get the price you want

It’s harder to find a good multi-family deal since there are fewer properties, and recently a lot more competition

Single-family Real Estate

PROS

Finding a deal is easier: sIngle-family homes are more plentiful than just about any other form of real estate. WIth a higher pool of sellers, finding a good deal is more likely; if you’re flipping, there are hard-money lenders ready to help

Single-family homes yield slightly higher rent for the same number of beds and baths than an apartment

Tenants enjoy living in a single-family home with a yard and driveway, and you can often negotiate them doing yard maintenance for you

Single-family appreciates with the market; it’s easier to gain equity by doing little to no work on the property if your house is in a growing market

CONS

With 100 single-family homes, there are 100 heating sources, 100 tenants to collect rent from, and 300+ neighbors to deal with. The economies of scale just aren’t as good as multi-family

If you’re renting and a tenant doesn’t pay, you have no income that month but still have expenses to pay

Acquisition cost per unit is higher with single-family

Different investing strategies work for different people, motivations, and preferences. Personally, I like single-family for turning quick profits, and multi-family for longer-term buy and holds, due to easier management. Different strategies for different markets, and different times.